John Feehery: Speaking Engagements

The Problem with Medicare

Posted on September 8, 2009

When I go running, if I don’t have something to distract me, like some music on my IPod or somebody to talk to, I start focusing on the little aches and pains that inevitably come with running.

Usually, by focusing on those aches and pains, my running time gets a bit shorter, less pleasant, and less productive.

I imagine that same dynamic will play out when I retire.If I don’t have something to distract me, like another job or volunteer work, I will start focusing on the little aches and pains that I would otherwise ignore.And I imagine that I will start going to the doctor more, especially if I have nothing else to do.

It is hard to quantify how many seniors go to the doctor to investigate each and every one of their aches and pains, but I would wager that it is a fairly high number.

And since the cost of those health care visits are largely picked up by the taxpayers through either Medicare or Medicaid, there is very little incentive to curtail them.

Perhaps the most perverse part of this dynamic though is not the actions of the seniors -- who, for the most part, have very legitimate reasons to go see their doctors on a regular basis (as my dad tells me, getting old is not for sissies)-- is that because Medicare underpays the doctors for their services, doctors have an incentive to run as many tests as possible in order to get the money they think they deserve.

That has an impact on the rest of our health care, as well.Doctors in America tend to be test-happy, not only to practice defensive medicine, but also to make up for the hole caused by unfair Medicare reimbursement rates.

So, you have a dynamic where senior citizens go to see doctors because they are focused on their various aches and pains.The doctors, who are getting screwed by Medicare, then run multiple tests in order to not only salve the anxieties of their patients, but also to get back some of their lost revenue.

The result is health care costs run amok.That is the beauty of a government-run program.Perverse consequences come from government bureaucrats and in the long-run, it is the tax-payer who gets screwed.

It is well understood by politicians that Medicare is a popular program with senior citizens, and that reforming it is politically perilous.That doesn’t mean, however, that the program works well.

Expanding the Medicare model to the rest of country would be a financial disaster for the country.Medicare should be reformed to not just cut costs, but to improve health care delivery and take away perverse incentives that lead to higher prices elsewhere.